Energy Industry Continues to Reshape Itself to Fit New World of Oil & Gas Resources

Two multi-billion dollar deals in the news this weekend provide additional evidence of how advances in drilling technology have unlocked vast new energy resources and are reshaping the energy industry. Norwegian oil company Statoil is paying about $4.4 billion for Brigham Exploration, getting “a stronger foothold in unconventional resources” according to the Wall Street Journal. The Brigham deal will gain Statoil a significant footprint in the Williston Basin, a so-called “tight oil” formation that includes the wildly productive Bakken Formation in North Dakota and Montana. Statoil had previously invested in the Eagle Ford Shale in Texas, another unconventional oil and gas resource that has been a source of new reserves.

Separately, pipeline company Kinder Morgan has offered to buy El Paso Corporation for $21.1 billion (and assuming 17 million in debt, raising the cost of the deal to $38 billion). The WSJ says Kinder Morgan is “making a big bet that natural gas blasted from shale rocks around the country will become a huge force in America’s energy future.”

Kinder Morgan on Sunday made a huge bet in the future of natural gas, with word it will buy El Paso Corp. for $21.1 billion in a deal that will make it the largest operator of natural gas pipelines in the country, as well as the fourth-largest energy company in North America.

The cash-and-stock deal combines two of Houston’s biggest companies into a single industry titan, with … access to virtually every natural gas field and consuming market in the country.

It comes as pipeline companies are repositioning themselves amid a recent surge in U.S. natural gas and crude oil production from shales and other so-called unconventional formations from Texas to North Dakota, and it finds another major energy company signaling its belief that the trend is more than hype.

At $21.1 billion, that’s a mighty expensive signal.

Admittedly, there is a lot of hype. Some people believe the large resource and reserve additions are almost all hype. Others – and I put myself in this category – believe there is a lot of new very real access to and production from reserves that could not have been legitimately booked as resources five or ten years ago. The trend is more than hype.

Dr. Michael Giberson is an instructor with the Center for Energy Commerce in the Rawls College of Business at Texas Tech University. Formerly, he was an economist with Potomac Economics, Ltd., a leading provider of independent market monitoring and economic analysis to the electric power industry. Prior to working for Potomac, Michael Giberson worked for five years as an independent energy industry analyst and served one year as a research fellow with George Mason University's Critical Infrastructure Protection Project and the Interdisciplinary Center for Economic Science. He previously worked for the Center for the Advancement of Energy Markets and Argonne National Lab.

The Barnett Shale, Marcellus and Baaken are all proof that the USA still has a ton of natural resources left to explore. Hopefully, relaxed government regulations will help wrangle the high oil prices and allow for more <a href=”http:www.investmetnsinenergy.com>energy investments</a> and energy production domesticly. This would be certain to help out the economy.

The front page of the Sunday (Monday too) Minneapolis Startribune (affectionately known as “The Red Star” by some) was a poster art story titled, “The Great Oil Rush.” There is a worker shortage serving the North Dakota oil developments.Also in the paper, a weeklong+ visit by the King and Queen of Norway to this area. In an interview, he said ice and climate were changing and he hoped it was man made so we can do something about it.So, if anybody can find a coherent story in strategic energy development, economics, environment, and politics, I haven’t heard it.Some of the comments in the Startribune were funny (since another story was about Occupy Wall Street demonstrations and no jobs). Many said they would never move to North Dakota for work. My feeling is this is deja vu all over again. Get the tough SOBs to create the wealth and comforts from nothing, and the freeloaders will overrun the place in a year.